House leaders say there won't be a vote tonight. Still, there has been progress in talks at the Capitol. Those familiar with negotiations say households earning more than $450,000 would see rate increases but work remains on the issue of spending cuts.

President Obama said Monday that Congress is making progress on a deal to avoid the fiscal cliff, at least temporarily.

An agreement is "within sight -- but it's not done," Obama said, appearing with supporters at the White House who would presumably see their taxes rise if there is no deal by midnight.

While not providing specific details, Obama said the proposal would help reduce the nation's $16 trillion-plus debt through higher taxes on the wealthy as well as budget cuts.

It will also extend unemployment insurance and preserve tax credits for such middle class items as child care and education, Obama said.

The president said he would have preferred a bigger debt reduction deal, but congressional Republicans and now it will have to be done in pieces.

Down the line, Obama said he will continue to insist that debt reduction be done with "shared sacrifice," tax hikes on the wealthy as well as program cuts.

Obama spoke as Congress reconvened for a rare New Year's Eve session Monday, while leaders huddled behind closed doors to work on details of an agreement.

They included Vice President Biden and top Senate Republican leader Mitch McConnell. They spoke at least twice by phone early Monday morning in an effort to beat a midnight deadline for the start of a series of tax hikes and spending cuts.

McConnell and Biden "will continue to work toward a solution," said McConnell spokesman Don Stewart.

Senate Majority Leader Harry Reid, D-Nev., who is leading negotiations for his party, said on the Senate floor that a deal remained out of reach Monday morning.

"Discussions continue today on a plan to protect middle-class families from a tax increase tomorrow," Reid said. "Negotiations are continuing as I speak."

Consensus was building around a plan to allow the George W. Bush era rates to expire for individuals earning above $400,000 and joint filers above $450,000. Negotiators were also focused on an increase in the estate tax rate, and a one year extension of unemployment benefits.

Without action, all of the Bush-era tax rates expire at midnight resulting in tax increase on practically every American household. Democrats have offered to raise the threshold for protecting the current rates from $250,000 and below to $450,000 and below to bring more Republicans on board for a deal. But the offer is ruffling feathers among liberal Democrats who want President Obama to stick to his campaign pledge to raise rates on earners above $250,000.

"This is one Democrat that doesn't agree with that at all," said Sen. Tom Harkin, D-Iowa. "I think that's grossly unfair." Harkin said that most Americans earn between $25,000-$60,000. "And they're the ones getting hammered right now," he said.

Optimism has ebbed and flowed on Capitol Hill as party leaders and White House officials continue to wrestle over budget details. McConnell called on Biden on Sunday to step into talks he has been absent from because McConnell and Reid hit an impasse. McConnell and Biden have successfully negotiated legislation in previous fiscal fights. They spoke at 12:45 a.m. and 6:30 a.m.

From Capitol Hill on Monday morning, Sen. Tom Coburn, R-Okla., told MSNBC's Morning Joe that most lawmakers, who are not among the small group of negotiators, were sitting around the Capitol building listening to pundits on television.

If Congress fails to strike a deal, President Obama has asked Reid to bring to the floor a stripped-down plan that would include a renewal of unemployment insurance and an extension of the George W. Bush tax cuts for middle-class Americans who make less than $250,000 a year.

"Republicans will have to decide if they're going to block it, which will mean that middle-class taxes do go up," President Obama said on Sunday on NBC's Meet the Press.

In one sign of movement Sunday, Republicans dropped a demand to slow the growth of Social Security and other benefits by changing how those payments are increased each year to allow for inflation.

Budget conflicts have been a recurring theme in the 112th Congress, which ends Thursday at noon when nearly 100 new House and Senate lawmakers will be sworn in to office.

The clash between a Democratic president and a divided Congress occurred during the near-government shutdown in spring 2011. It happened again that same year when the government nearly defaulted during a dispute over the debt ceiling.

And it is likely to happen again in 2013 when Congress must approve in mid-February an increase in the $16.4 trillion debt ceiling, the nation's borrowing authority, and in late March when the current federal funding runs out and another government shutdown threat looms if the partisan gridlock continues.